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Analysis of the Gas Segment

The importance of the gas segment, including sales and distribution, decreased by over four percentage points in terms of contribution to profits between 2006 and 2007.

The importance of this business segment with respect to total Group activities is illustrated below:

(mln/)

31-Dec-2006

31_Dec-2007

Change

Change %

Area EBITDA

116.1

104.7

-11.4

-9.8%

Group EBITDA

426.7

453.4

+26.7

+6.3%

Percentage weight

27.2%

23.1%

-4.1 p.p.

The abnormal weather conditions this year continued as they had started in the last quarter of 2006: the increase in average temperatures significantly affected all the operators on the market, further reducing volumes distributed and sold.

The table below quantifies this data and describes the change in volumes in the two periods examined, which affected the distribution and sales activity results.

Quantitative data

31-Dec-2006

07-gen-00

Change

Change %

Number of customers (thousand units)

1,003.1

1,018.7

+15.6

+1.6%

Volumes distributed (millions of cubic metres)

2,312.3

2,150.4

-161.9

-7.0%

Volumes sold (millions of cubic metres)

2,491.4

2,414.2

-77.2

-3.1%

- of which trading volumes

267.4

300,6

+33.2

+12.4%

Due to the weather, distributed volumes decreased from 2,312.3 million cubic metres in 2006 to 2,150.4 in 2007, a drop of 7.0%.

Trends were positive in terms of volumes sold, which meant that volume losses were reduced to 3.1%, notwithstanding the above mentioned adverse weather conditions: this result is due to the greater volumes traded and the customers acquired outside the traditional area of the Group.

In addition to the effect of the weather, gas results were also negatively affected by the electricity and gas authorities (Aeeg) who reduced sales tariffs (resolution No. 134/06) effective as of 1 October 2006.

These two factors contributed to the financial results summarised below:

Income statement
(mln/)

31-Dec-2006

Inc%

31-Dec-2007

Inc%

Change

Change %

Revenues

987.6

922.0

-65.6

-6.6%

Operating costs

(856.9)

-86.8%

(810.5)

-87.9%

-46.4

-5.4%

Personnel costs

(44.1)

-4.5%

(39.5)

-4.3%

-4.6

-10.4%

Capitalised costs

29.5

3.0%

32.7

3.5%

+3.2

+10.8%

EBITDA

116.1

11.8%

104.7

11.4%

-11.4

-9.8%

Revenues in the gas segment decreased by 6.6%, falling from Euro 987.6 million in 2006 to Euro 922.0 million in 2007, due to lower volumes distributed and sold.

With respect to the previous year, the Group recorded a Euro 11.4 million decrease in EBITDA in this segment, falling from Euro 116.1 million to Euro 104.7. million.

It should be pointed out that profitability in this segment benefited from the increase in average distribution tariffs, also as a result of the lower volumes distributed, in addition to benefitting from a reduction in labour costs, mainly related to the lower absorption of sales costs in the business segment.

In light of the above, the percentage profitability fell from 11.8% in 2006 to 11.4% in 2007.